Home Forex News Oil Prices Rise To 10-Week Highs On OPEC Cuts

Oil Prices Rise To 10-Week Highs On OPEC Cuts

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  • OPEC Cuts
  • Decline U.S Crude Inventories
  • Improving Oil Demand

Oil prices remain upbeat after a fifth straight session of gains. Prices have risen to 10 weeks high, supported by a decline in crude supplies as well as a drop in U.S crude inventories. Production cuts by oil majors have also gone a long way in supporting oil prices that dropped to record lows in April.

Shrinking Supply

Immediate data indicates that U.S crude inventories dropped by 5 million barrels over the past week,  beating consensus estimates of a 1.2 million barrel rise. A second straight week of domestic crude supplies drop and drop in stocks at the Cushing Okla also continues to avert concerns over a glut in supply.

After hitting the subzero level at the peak of the COVID-19 pandemic, oil prices have rallied and appears to have found support above the $30 a barrel level. West Texas Intermediate oil is already trading above the $33 a barrel level in the New York Mercantile Exchange. Brent Crude, on the other hand, also appears to have found support near the $35 a barrel level.

Time                                      : 21/05/2020

Pivot                                     : $33.01

Technical review                  : Long above 33.21

Target                                   : $33.41, $34.54, $35.18, $36.57

Comments                             : Bullish

OPEC Cuts Impact

Amidst the positive developments in the U.S, it is the confirmation that OPEC countries are adhering to pledges to cut oil production that continues to fuel oil prices. Russia and its allies are reportedly doing their part in complying with the initial pledge of trimming production by 9.7 million barrels daily.

Oil prices had initially dropped to record lows as a glut in supply hit the markets as OPEC countries declined to cut production. Compounding the glut in supply was a drop in demand to record lows in the wake of COVID-19 triggered lockdowns.

Oil Demand has, however, ticked up in recent weeks as countries ease lockdown restrictions designed to curb the coronavirus spread. Crude markets are already signaling the possibility of a shift from enormous oversupply towards undersupply. Production cuts at the back of a spike in demand worldwide should continue to fuel an uptick in oil prices.

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